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PERC/LO-N Regional Project – Tackling Taxation, Informal
Economy and Corruption in the Western Balkans – towards better
governance and democratic process
Kick-off regional meeting
12 - 15 March 2013, Sofia
Current challenges and possibilities for changes
Bruno S. Sergi
University of Messina & ETUI
Some key issues in perspective
Terrific expectations about EU membership in
terms of social improvement and economic
growth
Today’s economic crisis
Relevant Challenges
SEE TU economic experts’ network has already identified several relevant
challenges and problems:
•
Unsustainable reduction in wages and pensions;
•
Growing inequality and injustice in the distribution of wealth;
•
A strict conditionality of the IMF and other international institutions, while governments often misuse
IMF’s support thereby concealing bad national strategies and policies;
•
Labour market difficulties and uncertainty regarding who should be in charge of job creation;
•
Amendments to and passing of new labour laws have reduced workers’ rights, wages and fundamental
standards of decent work.
Southeast Europe, Data at a Glance
Country
Population
(end-year, million)
Real GDP change,
in % 2011
GDP per capita at
PPP (euros) 2011
Annual inflation
rates (consumer
prices), 2011
Albania
3.2
3.0
6,800
3.4
Bosnia and Herzegovina
3.8
1.3
6,800
3.7
Croatia
4.4
0.0
15,100
2.3
Kosovo
2.1
5.0
5,080 (b)
7.3
FYR Macedonia
2.1
3.1
9,200
3.9
Montenegro
0.6
2.4
10,500
3.1
Serbia
7.3
1.6
8,800
1.1
Germany
81.8
3.1
28,700
2.5
Greece
10.8
–6.9
21,500
3.3
Poland
38.1
4.3
15,300
4.3
EU-27
501
1.5
24,400
3.1
Annual Growth Rates for Industry
Country
2008
2009
2010
2011
Albania
8.7%
10.6%
18.6%
10.0%
Bosnia and Herzegovina
7.3%
1.5%
3.7%
5.6%
Croatia
1.2%
-9.2%
-1.4%
-1.2%
FYR Macedonia
5.1%
-8.7%
-4.8%
3.3%
-2.0%
-32.2%
17.5%
-10.3%
1.4%
-12.6%
2.5%
2.1%
Germany (a)
-0.1%
-16.3%
10.9%
7.6%
Greece (a)
-4.2%
-9.2%
-6.6%
-8.1%
Poland (a)
2.4%
-3.7%
10.8%
7.2%
EU-27 (a)
-1.8%
-13.7%
6.8%
3.2%
Montenegro
Serbia
Inward FDI Stock, as a percentage of GDP
Country
2000
2005
2010
Albania
6.78
12.48
36.67
Bosnia and Herzegovina
19.66
27.54
42.50
Croatia
13.10
32.74
56.68
FYR Macedonia
15.05
35.88
47.98
Montenegro
–
–
138.18
Serbia
–
–
46.51
8.87
20.03
–
Montenegro + Serbia
Ranking on the Ease of Doing Business
Country
Doing Business 2013 Rank
Doing Business
2012 Rank
FYR Macedonia
23
22
Montenegro
51
57
Croatia
84
80
Albania
85
82
Serbia
86
95
Kosovo
98
126
Bosnia and Herzegovina
126
125
Germany
20
18
Greece
78
89
Poland
55
74
Global competitiveness
index
Country
Rank 2012-2013
Switzerland
1
Singapore
Germany
2
6
USA
7
UK
8
Honk Kong
9
Japan
China
10
Poland
29
41
Russia
67
Croatia
81
Bosnia and Herzegovina
88
Albania
89
Serbia
95
Greece
96
Source: World Economic Forum, The Global
Competitiveness Report 2012-2013, available
at <http://reports.weforum.org/globalcompetitiveness-report-2012-2013/>.
Economic Freedom Ranking
World Rank
World Rank
2012
2011
26 [71]
23 [71.8]
FYR Macedonia
43 [68.5]
55 [66]
Albania
57 [65.1]
70 [64]
Poland
64 [64.2]
68 [64.1]
Montenegro
72 [62.5]
76 [62.5]
Croatia
83 [60.9]
82 [61.1]
98 [58]
101 [58]
Greece
119 [55.4]
88 [60.3]
Bosnia and Herzegovina
104 [57.3]
104 [57.5]
Germany
Serbia
Economic Freedom Ranking
World Rank
2012
Germany
26 [71]
Albania
57 [65.1]
Poland
64 [64.2]
Croatia
83 [60.9]
Bosnia and Herzegovina
104 [57.3]
China
138 [51.2]
Syria
139 [51.2]
Russia
144 [50.5]
Note: freedom scores are in [.]: 100 - 80: free; 79.9
- 70: mostly free; 69.9 - 60: moderately free; 59.9 50: mostly not free; 49.9 - 0: repressed.
Source: The Heritage Foundation (in partnership
with The Wall Street Journal).
Knowledge Indexes
Rank
Country
2009 Knowledge Economy
2009 Knowledge Index
index
1
+2
Denmark
9.52
9.49
12
+3
Germany
8.96
8.92
27
+3
Hungary
8.00
7.88
37
-2
Poland
7.41
7.38
38
-7
Greece
7.39
7.58
40
+4
Croatia
7.28
7.28
43
+8
Bulgaria
6.99
6.94
47
+13
Romania
6.43
6.25
53
+20
Serbia
5.74
6.32
58
+14
FYR Macedonia
5.58
5.66
79
+7
Bosnia and Herzegovina
4.58
4.68
93
+10
Albania
3.96
3.92
EBRD Index for Banking Sector Reform and Interest Rate
Liberalisation
Albania
Bosnia and
Herzegovina
Croatia
FYR
Macedonia
Montenegro
Serbia
Slovenia
2000
2,33
2,33
3,33
2,67
n.a.
1
3,33
2001
2,33
2,33
3,33
2,67
n.a.
1
3,33
2002
2,33
2,33
3,67
2,67
n.a.
2,33
3,33
2003
2,33
2,33
3,67
2,67
n.a.
2,33
3,33
2004
2,67
2,67
4
2,67
2,3
2,33
3,33
2005
2,67
2,67
4
2,67
2,3
2,67
3,33
2006
2,67
2,67
4
2,67
2,7
2,67
3,33
2007
2,67
2,67
4
2,67
2,7
2,67
3,33
2008
3
3
4
3
3
3
3,33
2009
3
3
4
3
3
3
3,33
2010
3
3
4
3
3
3
3,33
Loans-to-GDP Ratio in %
(loans to nonfinancial private sector)
Albania
Bosnia and
Herzegovina
Croatia
Greece
FYR
Montenegro
Macedonia
Poland
Serbia
2004
9,6
32,3
51,8
n.a.
22,1
16,8
n.a.
24,8
2005
15,3
36,5
56,4
75,6
25,1
20,7
89,6
30,7
2006
22,2
39,5
64,0
79,5
30,2
39,4
93,1
30,8
2007
30,0
44,4
67,1
88,0
36,8
83,0
98,0
35,3
2008
35,2
50,9
68,1
92,2
43,9
90,7
101,8
41,4
2009
37,2
50,2
69,6
90,3
42,9
80,4
107,5
45,0
2010
38,2
51,9
70,2
92,1
44,9
81,4
109,6
47,5
Vulnerability Indicators
Banking system
Bank
dep.
(end of 2010)/4
Loans/
dep.
Country
risk
Private
sector, in %
12.10.11
(CDS
spread, bps)
latest
Total assets
as share of
Share in total assets:
GDP
State-owned
Foreign
banks
owned
banks
% of GDP
77,0
0,0
92,4
68,3
58,8 …
86,7
0,8
94,5
34,8
161,8 …
116,8
4,3
90,3
61,8
117,5
Macedonia
65,4
1,4
93,3
50,2
94,3 …
Montenegro
97,4
0,0
88,4
51,2
126,5 …
Poland
76,8
22,9
70,5
45,5
116,3
Serbia
65,3
16,0
75,3 …
Albania
Nonperforming loans
NPL in %
Dec 2010
NPL in %
latest
7,6
8,7
Bosnia and
Herzegovina
Croatia
...
...
492,5 ...
...
...
...
FYR
…
21,0 ...
268,6
…
8,8
8,4
16,9
17,1
10
5
0
17
17
Bosnia&Herzeg
ovina
Montenegro
2011
18
Serbia
15
18
Macedonia
20
Slovenia
20
Albania
23
Poland
25
Croatia
Corporate Income Tax Rates, 2011
23
20
10
5
0
17
17
Bosnia&Herze
govina
Montenegro
2011
18
Serbia
15
18
Macedonia
20
Slovenia
20
Albania
23
Poland
25
Croatia
Rates of Value Added Tax, 2011
23
20
Fiscal Balance and Public Debt, 2011
Country
Fiscal balance,
in % of GDP
Public debt,
in % of GDP
Albania
-3.6%
60.0%
Bosnia and Herzegovina
-1.3%
39.0%
Croatia
-5.0%
46.0
FYR Macedonia
-2.5%
27.7%
Montenegro
-4.1%
45.9%
Serbia
-5.0%
49.0%
Germany
-0.8%
80.5%
Greece
-9.4%
170.6%
Poland
-5.0%
56.4%
EU-27
-4.4%
82.5%
Balance on Current Account,
as percentage of GDP
Country
2004
2005
2007
2010
2011
Albania
-4.0
-6.1
-10.4
-11.4
-12.3
-16.2
-17.1
-10.7
-5.7
-8.8
Croatia
-4.1
-5.3
-7.3
-1.1
-1.0
Kosovo
-8.4
-7.4
-8.3
-17.4
-20.3
FYR Macedonia
-8.1
-2.5
-7.1
-2.1
-2.7
Montenegro
-7.2
-16.6
-39.5
-24.6
-19.5
-12.2
-8.8
-16.1
-7.4
-9.5
4.7
5.1
7.4
6.0
5.7
Greece
-5.8
-7.6
-14.6
-10.1
-9.8
Poland
-5.2
-2.4
-6.2
-4.7
-4.3
EU-27
0.5
0.1
-0.4
0
0.2
Bosnia and Herzegovina
Serbia
Germany
Unemployment Rate, LFS, in percentage
Country
Unemployment rate,
Unemployment rate,
Unemployment rate,
2008
2010
2011
Albania
13.0
13.7
14.0
Bosnia and Herzegovina
23.4
27.2
27.6
Croatia
8.4
11.8
13.5
Macedonia
33.8
32.0
31.4
Montenegro
17.2
19.6
19.7
Serbia
13.6
19.2
23.0
Germany
7.5
7.1
5.9
Greece
7.7
12.6
17.7
Poland
7.1
9.6
9.7
EU-27
7.1
9.7
9.7
Monthly Remuneration per Employee, 2010
Country
Euros
% (EU-27=100)
Index of real wages,
2009 (2000=100)
Albania
246
8.9
n.a.
Bosnia and Herzegovina
622
22.4
n.a.
Croatia
1054
38.0
121
FYR Macedonia
491
17.7
159
Montenegro
715
25.8
195
Serbia
461
16.6
245
Poland
883
31.8
125
EU-27
2776
100
134
Gross national savings % of GDP
Income Inequality, the Gini Index, 2008
Poverty Headcount Ratio at National Poverty Line
(percentage of population)
Country
2000 2001
Albania
Bosnia and Herzegovina
2002
2003
2004
25.4
19.5
11.2
FYR Macedonia
19.1
Poland
14.8 15.6
16.6
2007
2008
12.4
14
11.1
19.2
18.5
Montenegro
14
2006
18.5
17.7
Croatia
Serbia
2005
14.6
20.4
19
11.2
11.3
8
9
6.6
4.9
IMF Advices “Tailored” to Individual Country Circumstances
Labour market institutions and policies
Minimum
wages
Unemploy Labour tax Employme Collective
bargaining
Broader policies
Active
Public
labour
wage bill
ment
nt
benefits
protection
market
legislation
policies
Pensions
Growth
reforms
Country
√
√
√
√
Romania
√
√
Serbia
√
√
Greece
√
√
√
√
Iceland
Latvia
√
Portugal
√
Ukraine
√
√
√
√
√
√
CPI (Transparency
International) – World Score
Corruption perception index
Albania
Bosnia&Herz.
Bulgaria
Croatia
Czech rep.
FYRM
Greece
Hungary
Kosovo
Latvia
Lithuania
Montenegro
Poland
Romania
Serbia
Slovakia
Slovenia
Turkey
Rank
113
72
75
62
54
69
75
46
105
54
48
75
41
66
80
62
37
54
Score
33
42
41
46
49
43
41
55
34
49
64
41
58
44
39
46
61
49
46
41
37
20
0
69
75
75
120
Albania
Kosovo
Serbia
75
Greece
72
Bulgaria
80
Montenegro
Bosnia&Herz.
66
FYRM
Romania
62
Slovakia
54
62
Croatia
54
Turkey
48
54
Latvia
60
Czech rep.
Lithuania
Hungary
Poland
40
Slovenia
Corruption perception index (TI) – Rank by countries
113
105
100
80
Western Balkans Corruption
Indicator
Total
Urban
Rural
Male
Female
82
83,5
80,3
82,4
81,7
Prevalence of bribery (%)
12,5
12,2
12,9
13,3
11,7
Average number of bribes
5,0
4,9
5,1
4,9
5,1
Average amount paid (EUR)
133
149
116
130
138
Average amount paid (EUR.PPP)
257
294
216
125
255
Percentage of population having contact with
public administration
Average amount of bribes paid in cash as percentage of GDP per capita and as
percentage of average nominal monthly salary, by country/area (2010)
Countries/Areas
Indicators
Albania
Bosnia&He
rzegovina
Croatia
Kosovo
Montegegro
Serbia
FYRM
Average bribe (EUR.PPP)
103
222
410
174
480
349
1212
Average bribe (EUR)
43
112
280
179
233
165
470
Average bribe as % of GDP/capita
1,6%
3,5%
2,7%
10,0%
4,9%
4,0%
14,4%
Average bribe as % of average
nominal monthly salary
14%
28%
27%
n.a.
50%
35%
144%
Percentage distribution of bribes paid, by purpose of payment
Bosnia&Herz.
Albania
2.9
3.3 0
Montenegro
1.6
2 0
0
7.7
18.9
0
8.7
2.7
7.8
17.9
2.4
39
13.7
69.7
17.8
24.9
0.1
13.9
5.6
8.6
25
8.9
Croatia
2.5
0
1.1
17
Kosovo
Serbia
1.2
4.4
13
27.8
8.8
18.1
7.7
0
0.7
2.5 0
3.4
7.6
18.1
37.1
18.2
6.2
35.1
16.9
0
13.9
33.8
6.7
15.1
Western Balkans
receive better treatment
speed up procedure
2.3 1.8
0
3.7
avoid payment of fine
4.3
4.4
finalization of procedure
27.7
FYRM
12.1
1.6
receive information
12.4
1.7
11.2
3
reduce cost of procedure
11.8
no specific purpose
15.8
other
9.4
27.7
don´t remember
49.6
Percentage distribution of bribes paid by type of payment
Albania
Bosnia&Herz.
2
Montenegro
FYRM
4.2
2.1
7.7 2
1.4
4.8
0.5
9.1
12.5
14.5
9
45.4
16.9
79.3
99.4
69.9
9.3
24.6
Croatia
Kosovo
Serbia
0.3
4.6
7.4
6.8
1
7.2
5.2
6.5
2
6.6
43.9
6
3.5
28.4
52.2
65.9
33.6
37.7
cash
Western Balkans
3.1
3.1
3.7
food& drink
5.1
other goods
21.9
67.7
exchange of services
valuables
don´t remember
The underground/shadow economy affects ........
Criminal
economy
Legal and
illegal
activities take
place out of
the gaze of
taxmen
Policies
framed on
unreliable data
may be
inappropriate
Underground
Government
revenues
lower than
they
otherwise
would be
economy
Unreliable
official
statistics
Less economic
prosperity
Less economic
growth
Twin peaks
Both unemployment and government debt are high in advanced
economies following the Great Recession
Advanced economies
unemployment rate
Source: Finance & Development September 2011
Advanced economies
general government gross debt
Cutbacks hit home
Fiscal consolidation reduces incomes and raises unemployment in the short run.
Impact of a 1 percent of GDP fiscal consolidation on GDP and
unemployment
Note: Chart reports point estimates and one-standard-error bands; income measured by real GDP. See IMF (2010) and Guajardo, Leigh, and Pescatori (2011) for estimation details.
No job soon
Fiscal contractions raise unemployment, particularly
long-term unemployment
Impact of a 1 percent of GDP
fiscal consolidation on
short-term unemployment
Source: Finance & Development September 2011
Impact of a 1 percent of GDP
fiscal consolidation on long-term
unemployment
Hitting paychecks
Spending cutbacks affect wage earners the most.
Impact of a 1 percent fiscal
consolidation on wage income
Impact of a 1 percent fiscal
consolidation on prot and rent
income
More austerity?
 No! Jim O’Neill, president of Goldman Sachs asset management and father
of the acronym BRIC:
 introducing reforms does not imply austerity!
 reducing a government’s deficit without a clear strategy for economic growth is
not an intelligent policy.
 No! Deutsche Bank:
 it is important to let the ECB pump money into the system without having this
imply conditionality. That is, the ECB should use anti-spread shield to cut
interest rates on Italian and Spanish debt without having to ask additional
austerity measures to the two countries.
Relevant Changes
 Aligning Western Balkans’ legislation with the EU acquis in the field of
labour law
 Aligning the anti-discrimination laws with the EU acquis
 Implementation of relevant social legislation
 More efforts in the area of social dialogue
 Cope with unstable and deteriorating labour markets
 Free movement of labour with EU markets … (Croatian workers)?
 NB: EU new budget (2014-2020) priorities: employment,
innovation, effective management natural resources.
The Internet economy: a big change for the region?
By 2016, there will be 3 billion Internet users globally, a bit less that half the world’s population. The Internet
economy will reach $4.2 trillion in the G-20 economies:
- if it were a national economy, the Internet economy would rank in the world’s top five, behind only the
U.S., China, Japan, and India, and ahead of Germany. Across the G-20, it already amounted to 4.1% of
GDP, or $2.3 trillion, in 2010—surpassing the economies of Italy and Brazil;
- the Internet is powering growth and creating jobs.
In an average country: +10% in the Internet usage increase employment of +0.44% and +1.47% of youth
employment.
The Internet economy in the developed markets of the G-20 is forecast to grow at an annual rate of 8% over the
next five years. In developing markets, annual growth is expected to be 18%. These rates far outpace just about
every traditional economic sector.
This growth delivers new jobs across the employment spectrum and the jobs this growth creates are more
valuable than others. Estimates show that in the United States the multiplier effect for high-tech positions is
three times that for jobs in traditional manufacturing.
Markets worldwide shows that in the last three years, small and midsize companies that have embraced the
Internet in their business operations grew by 10% annually, adding jobs as they did so. Companies that have not
grew more slowly or shrank over the same period.
In recent years, multiple Central and Eastern European countries have undertaken efforts to build Internet
enablement and engagement. Estonia’s EstWin program aims to provide every household and business with fast
fiber-optic network access by 2015. Latvia and Lithuania rank among the top five countries for upload and
download speeds
Thank you!